How the waste industry might benefit from the blockchain
I am inspired by a Keynote Morning Note that takes a deep dive into how the creative industries can benefit from the blockchain, and it led me to wonder how the same thinking might be applied to the waste industry.
A key diagram in the Morning Note is below, building from work done by McKinsey. Note how it is framed in terms of artist rights (and not, say, the music industry).
This suggests an immediate point of reframing. It’ s not how the waste industry might benefit from the blockchain, but how waste might benefit from the blockchain.
Actually, let’s take a step to the left, and talk about how blockchain might support waste artists. No, not the people who make sculptures and stuff from rubbish, but the people who craft the beautiful systems that will create a world without waste. The people who nurture and craft an evolving system of materials flow so that it flourishes into abundance.
This is a space where we can have interesting thoughts. This is a space where we can access some new insights. So how does the above diagram translate?
Force 1: Establishing transparent peer-to-peer transactions
There is a lot of opacity in the world of waste. It is opaque around how much waste is generated, where it is generated, where it goes. It is also highly intermediated. Just some of the parties involved in the movement of waste are the generator, collector, processor, regulator. Within each of these parties are individuals, subcontractors, groups, each with separate roles to play.
Each of these parties take their clip of the value of the transaction, both financial (they charge for their services) but also the information in that transaction (they gather some information but not all, pass on some but not all). One of the reasons waste is valueless is because of this value clipping all the way down the line.
Transparent peer-to-peer transactions would be far more direct, and much more transparent. All transactions can be seen, and with the veil lifted on what actually happens, all sorts of value can be captured. This opens the existing industry up to immense competitive pressures, and enables the new to be born.
For instance, it becomes easy to see that there is a natural aggregation of organic waste in a particular area, and so an anaerobic digestion facility becomes obvious, perhaps co-owned by the waste generators and serviced by a new and simplified collection service. The trust built into the blockchain makes this transparency possible.
Force 2: Enabling ‘smart contracts’
The waste industry is built on selling dumb collections. It doesn’t matter if the bin is empty, half-full or overflowing. The contracting model is around selling as many “bin lifts” as possible, and charging for each lift. It doesn’t serve the generator at all.
They are also overwhelmingly in favour of the collection contractor. So much so that the Australian Competition & Consumer Commission took a company to court for unfair contract terms, and won.
Smart contracts can turn this around. Contracts that enable payments to the people who contribute a service, that enable flexibility in service delivery, that are geared to every party along the way.
For instance, a smart contract lets a bin automatically “ping” when it is ready to be collected, and that bin is then collected by the nearest available vehicle. Generators only pay for the services they use, collectors fill out their routes dynamically. There is no dispute around payment because collection has been automatically recorded as complete.
Force 3: Promoting efficient, dynamic pricing
The pricing for waste services is dumb and inefficient, built around averaged waste composition and weight.
A bin is charged per lift, irrespective of whether the bin is full or empty, contains recyclable materials or not. Materials received for processing are accepted on a binary basis of acceptable or not, rather than letting price shape processing.
There is no incentive for generators to think, nor any incentive for collectors or processors to do better.
This is dumb because costs and opportunities vary depending on the bin’s contents. The same applies for processing charges. A light bin costs less for the collector to get rid of. A bin filled with cardboard represents an opportunity to extract value. And the nature of waste is that bins will change around all the time, meaning that dumb pricing will miss the value.
The effect of dumb pricing is that opportunity is squeezed out of the system. Waste artists need flexible and dynamic pricing to enable them to craft a beautiful system.
For instance, collect fine grained data at the bin level. Weight, fullness, composition. These things are not difficult to do using existing sensors coupled with decentralised artificial intelligence. Provide an opportunity where light bins are discounted. Charge higher prices for full, heavy, mixed up waste bins. Identify and discount bins that are filled with recyclables that can be recovered. Create an automatic bidding process to optimise collection routes, with higher charges for urgent or distant collections, lower prices when the collection vehicle is right next door.
Force 4: Allowing ‘micrometering’ or ‘micromonetising’
Waste is charged at the gross level. A waste service agreement for a generator operates at the level of a monthly service charge, with a rental payable per bin, and then an additional amount for the number of bin lifts scheduled. At the processing or disposal facility it’s done on the basis of gross tonnes received, and generally discounts are offered for bulk tonnages.
There is no space in here for the fractal beauty that comes from monetising tiny little parts of the system. Businesses can only get paid at the coarsest of levels. And that’s not just the waste collection and processing bits, but also everything that comes in to forming up the system as a whole — education, technical components, invention of new value streams and so on.
Create the ability for micrometering these elements, and then providing micropayments for their use.
For instance, maybe somebody designs a great sensor; they get paid a micropayment for each time it is used. There are then further micropayments to give access to a continually learning system that recognises waste going into bins, with each user also attracting a micropayment for the ongoing contribution of data that lets the system learn. And, of course, tiny payments for each part of a collection and disposal system that can then be optimised through machine learning alerting the humans to opportunities. All joined up by a design that, perhaps, gamifies the whole so that the humans can respond to the opportunities.
Force 5: Establishing a reputation system
A reputation system to weed out the dodgy operators is vital. Sadly, the waste industry is characterised by people and businesses taking shortcuts to save money. These shortcuts undermine the good operators, and drag the whole system down.
A blockchain to store information verifying good behaviour creates a lasting reputation, and that reputation can be used by everybody in the system to inform decision making. To avoid the bad operators, and eventually force them out of the industry. This, clearly, needs to be done with nuance to preserve privacy.
For instance, sensors that automatically track waste provide an instant verification of good behaviour. The sensors monitor waste at a sensible level of granularity as it moves through the system, from generation through collection and processing until it emerges out the other side as a product for use again. Waste that disappears raises a red flag. Waste that is misrepresented by generators raises a red flag. Collection companies that don’t perform, people that don’t pay. It can all be recorded and used to inform ongoing decision making.
This ideation just skims the surface of the possible. The blockchain offers the chance for the waste system to become alive, to enable a sensed intelligence that gives signals across the system. System artists can then use these signals to create beautiful systems, systems that shift and evolve in response to the signals received. And the blockchain means that the artist gets paid for his or her work.
The blockchain is the foundation upon which a sensed system works. A decentralised store of information, with micropayments cascading up and down the line like little dopamine or cortisol pulses, the blockchain creates the environment where it is worthwhile developing the sensed system. Without the blockchain, the sensors push intelligence into a system that cannot respond. They add little value.
The current waste industry, built on squeezing out efficiency from a series of disconnected and information poor nodes, is on its last legs. It’s in its dying days where the behemoths have formed in a drive to extract rent from a system that has calcified into a series of set “knowns”. Scale rules because the system is dumb (not stupid, but dumb).
The blockchain, and the sensed system that it enables, changes all of that. From peer to peer payments, to dynamic pricing, to opportunities to micromonetise all sorts of currently invisible parts of the system, the waste industry shifts to a constellation of highly specialised players.
Each navigating and optimising and creating value from the materials they have. Each assured of trust via the blockchain, and so able to act well without being undermined by bad players. Each supported by machines that optimise at the microlevel in accordance with algorithms designed by the waste system artist. Each rewarded for excellence and innovation.
Learning, flexing, responding and anticipating, all to capture the value that exists in unwanted materials. And thus creating a world without waste.
Do you want to be a part of this conversation going on? Are you a waste system artist who wants to form the new? An investor who wants to understand the opportunity?
I am developing up a “Blockchain and waste” conference, and am looking for fellow travellers. People who want to connect up ideas, to share how this is unfolding.
Because this conversation is global, the event will be in a central hub. Dubai or Hong Kong are my current thoughts. Someplace that is easy to get to for a global community.
Interested? Reach out. The best place, at the moment, is LinkedIn.
